[Federal Register Volume 86, Number 136 (Tuesday, July 20, 2021)]
[Notices]
[Pages 38381-38389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15345]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92410; File No. SR-DTC-2021-012]


Self-Regulatory Organizations; The Depository Trust Company; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Consisting of Modifications to the Text of the Rules and the 
Procedures, of the Service Guide for the DTC Canadian-Link Service and 
the DTC Operational Arrangements Relating to the Elimination of the 
Canadian Dollar Settlement Feature of the Canadian-Link Service

July 14, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 12, 2021, The Depository Trust Company (``DTC'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II and III below, which Items have been 
prepared by the clearing agency. DTC filed the proposed rule change 
pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-4(f)(4) 
thereunder.\4\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(4).
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I. Clearing Agency's Statement of the Terms of Substance of the 
Proposed Rule Change

    The proposed rule change of DTC \5\ consists of modifications to 
the text of the Rules and the Procedures,\6\

[[Page 38382]]

including Rule 30, of the service guide (``Guide'') \7\ for the DTC 
Canadian-Link Service (``Canadian-Link Service'') and the DTC 
Operational Arrangements (Necessary for Securities to Become and Remain 
Eligible for DTC Services) (``OA'') \8\ relating to the elimination of 
the Canadian dollar (``CAD'') settlement feature of the Canadian-Link 
Service, as described below.
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    \5\ Capitalized terms not defined herein are defined in the 
Rules, By-Laws, and Organization Certificate of DTC (``Rules''), 
available at www.dtcc.com/~/media/Files/Downloads/legal/rules/
dtc_rules.pdf and the Guide.
    \6\ Pursuant to the Rules, the term ``Procedures'' means the 
Procedures, service guides, and regulations of DTC adopted pursuant 
to Rule 27, as amended from time to time. See Rule 1, Section 1, 
supra note 5. Pursuant to Rule 27, each Participant and DTC is bound 
by the Procedures and any amendment thereto in the same manner as it 
is bound by the Rules. See Rule 27 at 97, supra note 5.
    \7\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/service-guides/Canadian_Dollar_Settlement.pdf.
    \8\ Available at http://www.dtcc.com/~/media/Files/Downloads/
legal/issue-eligibility/eligibility/operational-arrangements.pdf.
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II. Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

    In its filing with the Commission, the clearing agency included 
statements concerning the purpose of and basis for the proposed rule 
change and discussed any comments it received on the proposed rule 
change. The text of these statements may be examined at the places 
specified in Item IV below. The clearing agency has prepared summaries, 
set forth in sections A, B, and C below, of the most significant 
aspects of such statements.

(A) Clearing Agency's Statement of the Purpose of, and Statutory Basis 
for, the Proposed Rule Change

1. Purpose
    The proposed rule change consists of modifications to the text of 
the Rules and the Procedures, including Rule 30,\9\ the Guide and the 
OA relating to the elimination of the CAD settlement feature of the 
Canadian-Link Service, as described below.
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    \9\ Supra note 5.
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Background

    In 2006, DTC established a ``northbound'' Canadian-Link Service 
that supports transactions settled in CAD.\10\ Rule 30 \11\ describes 
the operation of the Canadian-Link Service, that permits DTC 
Participants using the Canadian Link Service (``Canadian-Link 
Participants'') to (A) settle Delivery Versus Payment (``DVP'') 
Securities transactions with participants (``CDS Participants'') of The 
Canadian Depository for Securities Limited (``CDS'') and other 
Canadian-Link Participants in CAD and (B) transfer CAD to or receive 
CAD from CDS Participants and other Canadian-Link Participants without 
any corresponding delivery or receipt of Securities.\12\
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    \10\ See Securities Exchange Act Release No. 52784 (November 16, 
2005), 70 FR 70902 (November 23, 2005) (SR-DTC-2005-08).
    \11\ Supra note 5.
    \12\ The Canadian-Link Service also provides for Cross-Border 
USD Securities Transactions between Participants and CDS 
Participants. See Rule 30, Section 1(a)(2), supra note 5. See also 
Securities Exchange Act Release No. 55239 (February 5, 2007), 72 FR 
6797 (February 13, 2007) (SR-DTC-2006-15).
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    The Canadian-Link Service provides Participants with a single 
depository interface for CAD transactions. The link facilitates 
Participants' ability to maintain U.S. and Canadian Security positions 
in their DTC accounts for Securities listed in both Canada and the 
United States (i.e., dually listed). This eliminates the need for 
Participants to maintain separate positions in an eligible \13\ 
Security in CDS for CAD settlements and in DTC for USD settlements. It 
also eliminates the need for Participants to reposition Securities 
inventory between DTC and CDS in preparation for corporate action 
events and or transaction processing for dually listed issues.
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    \13\ DTC may determine the Securities that are eligible for the 
Canadian-Link Service. Some Securities may be eligible for all 
purposes of the Canadian-Link Service, and some Securities may be 
eligible only for limited purposes (e.g., clearance and settlement 
through the facilities of CDS but only custody and asset servicing 
through the facilities of DTC). See Rule 30, Section 4, supra note 
5.
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    Transactions between Canadian-Link Participants and CDS 
Participants are processed through an omnibus account maintained by DTC 
at CDS (``DTC Omnibus Account'') in accordance with the rules and 
procedures of CDS. Canadian-Link Participants are able (i) to deliver 
Securities to or receive Securities from CDS Participants against 
payment (i.e., DVP) in CAD and (ii) to transfer funds to or receive 
funds from CDS Participants in CAD without any corresponding delivery 
or receipt of Securities. Transactions between Canadian-Link 
Participants and other Canadian-Link Participants are processed through 
accounts at DTC in accordance with the Rules.
    For both transactions (i) between Canadian-Link Participants and 
CDS Participants processed through the DTC Omnibus Account and (ii) 
between Canadian-Link Participants and other Canadian-Link Participants 
processed through accounts at DTC, there is a single end-of-day CAD 
money settlement between DTC and its Canadian-Link Participants.\14\ 
For the transactions between Canadian-Link Participants and CDS 
Participants processed through the DTC Omnibus Account, there is a 
separate end-of-day CAD money settlement between CDS and DTC.
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    \14\ Pursuant to Section 1(h)(15) of Rule 30, the term 
``Canadian-Link CAD Money Settlement'' is defined as the money 
settlement of Canadian-Link Transactions in CAD Funds between the 
DTC and Canadian-Link Participants. Rule 30, supra note 5. DTC notes 
that in a list of defined terms at the beginning of Rule 30, the 
definition of Canadian-Link CAD Money Settlement is specified to 
appear in Section 1(a)(15); however, the definition actually appears 
in Section 1(h)(15) of Rule 30 and not Section 1(a)(15) of Rule 30. 
Id.
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    As with all transactions processed at DTC, DTC maintains risk 
controls with respect to transactions processed by Canadian-Link 
Participants, including the Net Debit Cap and Collateral Monitor.\15\ 
With respect to Collateral Monitor, each Canadian-Link Participant has 
a single Collateral Monitor with respect to transactions processed for 
such Participant through the Canadian-Link Service and other 
transactions processed by DTC for such Participant.
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    \15\ The term ``Collateral Monitor'' of a Participant, as used 
with respect to its obligations to the Corporation, means, on any 
Business Day, the record maintained by the Corporation for the 
Participant which records, in the manner specified in Procedures, 
the algebraic sum of (i) the Net Credit or Debit Balance of the 
Participant and (ii) the aggregate Collateral Value of the 
Collateral of the Participant. Rule 1, Section 1 at 3, supra note 5.
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Proposed Rule Change
    In recent years, activity at DTC in CAD has accounted for less than 
0.20 percent of DTC's average daily valued settlement volume. Most of 
this activity relates to distributions such as principal, interest and 
dividend payments in Securities held at CDS by DTC on behalf of 
Participants. While Participants continue to use the Canadian-Link 
Service for custody purposes to position Securities inventory at CDS 
through DTC's CDS account and receive related distribution payments, no 
Participants have effectuated a DVP of Securities through the Canadian-
Link Service since 2018. DTC attributes this lack of DVP activity to a 
lack of demand among its Participants for the DVP aspect of the 
Canadian-Link Service.
    CDS recently communicated to CDS's participants, including DTC, 
that it will be modernizing its settlement system through an initiative 
referred to as the Post Trade Modernization (``CDS PTM'') Project.\16\ 
For DTC to continue to maintain access to CDS's CAD settlement 
services, it would have been necessary for DTC to perform systems 
development in order to be able to continue to use this aspect of the 
Canadian-Link service. However, the CDS modernization does not 
adversely impact DTC's ability to hold Securities

[[Page 38383]]

at CDS on behalf of Participants, receive distributions on behalf of 
Participants and facilitate Free Deliveries \17\ through the link.
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    \16\ See CDS's website at https://www.cds.ca/about/post-trade-modernization for information published by CDS regarding CDS PTM.
    \17\ Pursuant to Rule 1, the term ``Free Delivery'' means a 
Delivery free of any payment by the Receiver through the facilities 
of the Corporation, as provided in Rule 9(B) and as specified in the 
Procedures. See supra note 5.
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    Rule 30, Section 2 provides:

    The Corporation has entered into various agreements with CDS, 
and as a participant of CDS has undertaken to abide by the rules, 
procedures and user guides of CDS (the ``Rules and Procedures of 
CDS''). Such agreements and the Rules and Procedures of CDS, as the 
same may be amended or supplemented from time to time, are 
collectively referred to as the ``CDS Documents''. Notwithstanding 
anything else contained in this Rule 30 or otherwise in the Rules 
and Procedures of the Corporation, the Corporation shall offer the 
Canadian-Link Service only for so long as the Corporation continues 
to be a participant of CDS and there have been no changes in the CDS 
Documents, or actions taken by CDS, which would, in the judgment of 
the Corporation, prevent or impair the ability of the Corporation to 
offer the Canadian-Link Service or make it impractical or onerous 
for the Corporation to do so.

    DTC has determined that it would no longer be able to access CDS's 
CAD settlement service without making necessary system changes 
consistent with CDS PTM. In DTC's judgement, it would be impractical 
for DTC to incur the costs to undertake such changes, including 
incurring development costs, due to the lack of demand by its 
Participants to use the valued aspect of the Canadian Link Service.
    In this regard, because there is no Participant demand for valued 
CAD Securities transaction and CAD Funds transfer aspect of the 
Canadian-Link Service, it is DTC's judgement that it would be 
impractical for DTC to continue to process valued CAD Securities and 
CAD Funds transfer transactions and, in accordance with its discretion 
set forth in Rule 30 as described above, DTC has discontinued 
processing of CAD Securities and CAD Funds transactions through the 
Canadian-Link Service.\18\ DTC proposes to amend the Rules to clarify 
its Rules in this regard and reflect the elimination of the function of 
processing of CAD Securities and CAD Funds transactions pursuant to the 
provisions of Rule 30, Section 2.\19\ However, because the CDS PTM 
changes are not expected to materially impact DTC's ability to perform 
custody and process Free Deliveries at CDS, DTC would continue to 
maintain its membership, including its Securities account, at CDS, to 
hold Securities on behalf of DTC Participants at CDS and offer the 
functionality allowing Participants the ability to process Free 
Deliveries through the Canadian-Link Service. In addition, DTC would 
continue to pass distributions paid on Securities held in its DTC 
account to the applicable Participants in CAD or USD.\20\
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    \18\ See DTC Important Notice 13639-20 (July 10, 2020). 
Available at https://www.dtcc.com/-/media/Files/pdf/2020/7/10/13639-20.pdf.
    \19\ Supra note 5.
    \20\ See OA at 23-27, supra note 8.
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    In this regard, DTC proposes to update the text of its Rules to 
reflect the discontinuance of processing valued CAD Securities 
transactions and CAD Funds transfers through the Canadian-Link Service.
Proposed Rule Changes
Proposed Changes to Rulebook
    Pursuant to the proposed rule change, DTC will delete text in Rule 
30 relating to the processing of CAD transactions in the Canadian-Link 
Service, including as follows.
Defined Terms
    Defined terms relating to the description of the processing of CAD 
transactions in Rule 30 would be deleted, including CAD Funds,\21\ 
Canadian-Link CAD Money Settlement,\22\ Canadian-Link CAD Net Debit 
Cap,\23\ Canadian-Link CAD Net Settlement Credit,\24\ Canadian-Link CAD 
Settlement Debit,\25\ Canadian-Link Funds Transactions,\26\ Canadian-
Link Net Debit Cap,\27\ Canadian-Link Net Settlement Credit,\28\ 
Canadian-Link Net Settlement Debit,\29\ Canadian-Link Participants Fund 
Cash,\30\ Canadian-Link Required Participants Fund Deposit,\31\ 
Canadian-Link USD Net Debit Cap,\32\ Canadian-Link USD Net Settlement 
Credit,\33\ Canadian-Link USD Net Settlement Debit,\34\ CDS Payment 
Exchange,\35\ Canadian-Link Securities

[[Page 38384]]

Transactions,\36\ CDS Settlement Recap,\37\ CDS Settlement Recap 
Time,\38\ Collateral Monitor Conversion Rate,\39\ Cross-Border CAD 
Funds Transactions,\40\ Cross-Border CAD Securities Transactions,\41\ 
Cross-Border Net Additions,\42\ Cross-Border USD Securities 
Transactions,\43\ DTC Omnibus Account CAD Net Debit Cap,\44\ DTC 
Omnibus Account CAD Net Settlement Credit,\45\ DTC Omnibus Account CAD 
Net Settlement Debit,\46\ DTC Omnibus Account Net Debit Cap,\47\ DTC 
Omnibus Account Net Settlement Credit,\48\ DTC Omnibus Account Net 
Settlement Debit,\49\ DTC Omnibus Account USD Net Debit Cap,\50\ DTC 
Omnibus Account USD Net Settlement Credit,\51\ DTC Omnibus Account USD 
Net Settlement Debit,\52\ DTC Canadian Settlement Bank,\53\ DTC 
Settlement Payment Deadline,\54\ DTC Settlement Recap,\55\ DTC 
Settlement Recap Time,\56\ Funds,\57\ Intra-DTC CAD Funds 
Transactions,\58\ Intra-DTC CAD Securities Transactions,\59\ 
Participant Canadian Settlement Bank,\60\ Payment Default Conversion 
Rate,\61\ Payment

[[Page 38385]]

Default Exchange Rate \62\ and USD Funds.\63\
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    \21\ Pursuant to Section 1(h)(3) of Rule 30, the term ``CAD 
Funds'' are defined as funds denominated in Canadian dollars. See 
Rule 30, supra note 5.
    \22\ See supra note 14.
    \23\ Pursuant to Section 8(a) of Rule 30, the term ``Canadian-
Link CAD Net Debit Cap'' is defined as a limit established by DTC 
(i) on the negative CAD Funds balance that may, from time to time, 
be incurred by a Canadian-Link Participant in respect of Canadian-
Link Transactions processed for such Participant through the 
Canadian-Link Service in CAD Funds. See Rule 30, supra note 5.
    \24\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link CAD Net Settlement Credit'' is defined as the net amount of CAD 
Funds, calculated by DTC by a time on a CDS Business Day set forth 
in the Procedures, payable by DTC to a Canadian-Link Participant. 
Id.
    \25\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link CAD Net Settlement Debit'' is defined as the net amount of CAD 
Funds, calculated by DTC by a time on a CDS Business Day set forth 
in the Procedures, payable to DTC by a Canadian-Link Participant. 
Id.
    \26\ Pursuant to Rule 30, Section 1(h)(8), the term ``Canadian-
Link Funds Transactions'' is defined as Cross-Border CAD Funds 
Transactions and Intra-DTC CAD Funds Transactions, referred to 
individually or collectively as the context may require. Id.
    \27\ Pursuant to Rule 30, Section 8(a), the term ``Canadian-Link 
Net Debit Cap'' is defined as the Canadian-Link CAD Net Debit Cap 
and Canadian-Link USD Net Debit Cap referred to, individually or 
collectively as the context may require. This section provides that 
the Canadian-Link Net Debit Cap of each Canadian-Link Participant 
shall be determined by a formula (taking into account the volume of 
Canadian-Link Transactions of each Canadian-Link Participant) that 
shall be fixed by DTC and set forth in the Procedures. Id.
    \28\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link Net Settlement Credit'' is defined as the Canadian-Link CAD Net 
Settlement Credit and Canadian-Link USD Net Settlement Credit 
referred to, individually or collectively as the context may 
require. Id.
    \29\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link Net Settlement Debit'' is defined as the Canadian-Link CAD Net 
Settlement Debit and Canadian-Link USD Net Settlement Debit referred 
to, individually or collectively as the context may require. Id.
    \30\ Pursuant to Rule 30, Section 6(c), the term ``Canadian-Link 
Participants Fund Cash'' is defined as that portion of the cash in 
the Participants Fund equal to the aggregate amount of the Canadian-
Link Required Participants Fund Deposits of all Canadian-Link 
Participants. Id.
    \31\ Pursuant to Rule 30, Section 6(a), the term ``Canadian-Link 
Required Participant Fund Deposit'' is defined as an amount each 
Canadian-Link Participant shall be required to deposit to the 
Participants Fund (as described in Section 1 of Rule 4) an amount of 
USD Funds in addition to the amount of USD Funds specified in 
Section 1(a)(i) of Rule 4. The Canadian-Link Required Participants 
Fund Deposit shall be in cash. The Canadian-Link Required 
Participants Fund Deposit of each Canadian-Link Participant shall be 
determined by a formula (considering the volume of transactions of 
each Canadian-Link Participant) that shall be fixed by the DTC and 
set forth in the Procedures. DTC may, from time to time, change the 
formula for determining the Canadian-Link Required Participants Fund 
Deposits of Canadian-Link Participants; provided, however, that 
notice of such change shall be given to each Canadian-Link 
Participant at least ten Business Days in advance of the effective 
date thereof. Id.
    \32\ Pursuant to Rule 30, Section 8(a), a ``Canadian-Link USD 
Net Debit Cap'' is to be established by DTC on the negative USD 
Funds balance that may, from time to time, be incurred by a 
Canadian-Link Participant in respect to Canadian-Link Transactions 
processed for such Participant through the Canadian-Link Service in 
USD Funds. Id.
    \33\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link USD Net Settlement Credit'' is defined as the net amount of USD 
Funds calculated by DTC by a time on a CDS Business Day set forth in 
the Procedures and payable by DTC to a Canadian-Link Participant. 
Id.
    \34\ Pursuant to Rule 30, Section 12(b), the term ``Canadian-
Link USD Net Settlement Debit'' is defined as the net amount of USD 
Funds calculated by DTC by a time on a CDS Business Day set forth in 
the Procedures and payable to DTC by a Canadian-Link Participant. 
Id.
    \35\ Pursuant to Rule 30, Section 13(a), ``CDS Payment 
Exchange'' is defined as on each CDS Business Day, during a period 
of time set forth in the Rules and Procedures of CDS, when CDS is 
required to pay to DTC the amount of its DTC Omnibus Account CAD Net 
Settlement Credit, id, or DTC is required to pay to CDS the amount 
of its DTC Omnibus Account CAD Net Settlement Debit, as specified in 
the CDS Settlement Recap. All such payments to or by DTC are made to 
or by a Canadian bank acting on behalf of DTC. Id.
    \36\ Pursuant to Rule 30, Section 1(h)(7), ``Canadian-Link 
Securities Transactions'' is defined, individually or collectively 
as the context may require, Cross-Border CAD Securities 
Transactions, Cross-Border USD Securities Transactions and Intra-DTC 
CAD Securities Transactions. Id.
    \37\ Pursuant to Rule 30, Section 12(a), provides the definition 
of ``CDS Settlement Recap'' as follows: ``On each CDS Business Day, 
by a time set forth in the Rules and Procedures of CDS, CDS 
calculates and provides to the Corporation a settlement recap (the 
``CDS Settlement Recap'') with (i) the net amount of CAD Funds 
payable by CDS to the Corporation (a ``DTC Omnibus Account CAD Net 
Settlement Credit'') or by the Corporation to CDS (a ``DTC Omnibus 
Account CAD Net Settlement Debit''), (ii) the net amount of USD 
Funds payable by CDS to the Corporation (a ``DTC Omnibus Account USD 
Net Settlement Credit'') or by the Corporation to CDS (a ``DTC 
Omnibus Account USD Net Settlement Debit'') and (iii) other 
information in respect of the Cross-Border Transactions processed by 
CDS for the Corporation on such CDS Business Day.'' Id.
    \38\ Pursuant to Rule 30, Section 12(a), ``CDS Settlement Recap 
Time'' is defined as time when CDS provides the CDS Settlement Recap 
to DTC. Id.
    \39\ Pursuant to Rule 30, Section 16(b), provides the definition 
of ``Collateral Monitor Conversion Rate'' as follows: ``If any 
computation has to be made requiring the conversion of an amount of 
CAD Funds into an amount of USD Funds for the purpose of calculating 
the Collateral Monitor of a Canadian-Link Participant pursuant to 
Section 9 of this Rule 30, the conversion rate for such purpose 
shall be a rate determined by a formula (taking into account 
exchange rate fluctuations) that shall be fixed by the Corporation 
and set forth in the Procedures (the ``Collateral Monitor Conversion 
Rate'').'' Id.
    \40\ Pursuant to Rule 30, Section 1(a)(4), the term ``Cross-
Border CAD Funds Transactions'' is defined as the transfer of 
Canadian dollars between Participants of DTC and participants of 
CDS. Id.
    \41\ Pursuant to Rule 30, Section 1(a)(1), the term ``Cross-
Border CAD Securities Transactions'' is defined as the settlement of 
valued transactions (A) in Securities that are Eligible Securities 
(as described in Section 1 of Rule 5) and in Securities that are not 
Eligible Securities (B) in Canadian dollars (C) between Participants 
of the Corporation and participants of CDS (``Cross-Border CAD 
Securities Transactions''). Id.
    \42\ Pursuant to Rule 30, Section 7(b), the term ``Cross-Border 
Net Additions'' is defined as any Cross-Border Securities credited 
to the DTC Omnibus Account. Id.
    \43\ Pursuant to Rule 30, Section 1(a)(2), the term ``Cross-
Border USD Securities Transactions'' is defined as the settlement of 
valued transactions in (A) Securities that are not Eligible 
Securities (B) in US dollars (C) between Participants of DTC and 
participants of CDS. Id.
    \44\ Pursuant to Rule 30, Section 8(a), the term ``DTC Omnibus 
Account CAD Net Debit Cap'' is defined as a limit established by CDS 
on the negative CAD Funds balance that may, from time to time, be 
incurred in the DTC Omnibus Account in respect of Cross-Border 
Transactions processed for DTC through the facilities of CDS in CAD 
Funds. Id.
    \45\ See supra note 37.
    \46\ Id.
    \47\ Pursuant to Rule 30, Section 8(a), the terms ``DTC Omnibus 
Account CAD Net Debit Cap'' and ``DTC Omnibus Account USD Net Debit 
Cap'' are referred to, individually or collectively as the context 
may require, as the ``DTC Omnibus Account Net Debit Cap.'' See Rule 
30, supra note 5.
    \48\ Pursuant to Rule 30, Section 12(a), the term ``DTC Omnibus 
Account Net Settlement Credit'' means the DTC Omnibus Account CAD 
Net Settlement Credit and DTC Omnibus Account USD Net Settlement 
Credit, individually or collectively as the context may require. Id.
    \49\ Pursuant to Rule 30, Section 12(a), the term ``DTC Omnibus 
Account Net Settlement Debit'' means the DTC Omnibus Account CAD Net 
Settlement Debit and DTC Omnibus Account USD Net Settlement Debit, 
individually or collectively as the context may require. Id.
    \50\ Pursuant to Rule 30, Section 8(a), the term ``DTC Omnibus 
Account USD Net Debit Cap'' is defined pursuant to the Rules and 
Procedures of CDS, as a limit established by CDS (i) on the negative 
USD Funds balance that may, from time to time, be incurred in the 
DTC Omnibus Account in respect of Cross-Border Transactions 
processed for the Corporation through the facilities of CDS in USD 
Funds. Id.
    \51\ See supra note 37.
    \52\ Id.
    \53\ Pursuant to Rule 30, Section 13(a), the term ``DTC Canadian 
Settlement Bank'' is defined as a Canadian bank acting on behalf of 
DTC for payments relating to CDS paying to DTC the amount of the DTC 
Omnibus Account CAD Net Settlement Credit, or DTC paying to CDS the 
amount of its DTC Omnibus Account CAD Net Settlement Debit, as 
specified in the CDS Settlement Recap. See Rule 30, supra note 5.
    \54\ Pursuant to Rule 30, Section 13(b), the term ``DTC 
Settlement Payment Deadline'' is defined as on each CDS Business 
Day, by a time set forth in the Procedures of the Corporation, each 
Canadian-Link Participant with a Canadian-Link CAD Net Settlement 
Debit shall pay to the Corporation the amount of its Canadian-Link 
CAD Net Settlement Debit, as specified in the DTC Settlement Recap. 
See Rule 30, supra note 5. The time when such payment must be made 
is referred to as the ``DTC Settlement Payment Deadline.'' Id.
    \55\ Pursuant to Rule 30, Section 12(b), the term ``DTC 
Settlement Recap'' is defined as described in the following: ``On 
each CDS Business Day, by a time set forth in the Procedures of the 
Corporation, the Corporation shall calculate and provide to each 
Canadian-Link Participant a settlement recap (a ``DTC Settlement 
Recap'') with (i) the net amount of CAD Funds payable by the 
Corporation to such Canadian-Link Participant (a ``Canadian-Link CAD 
Net Settlement Credit'') or by such Canadian-Link Participant to the 
Corporation (a ``Canadian-Link CAD Net Settlement Debit''), (ii) the 
net amount of USD Funds payable by the Corporation to such Canadian-
Link Participant (a ``Canadian-Link USD Net Settlement Credit'') or 
by such Canadian-Link Participant to the Corporation (a ``Canadian-
Link USD Net Settlement Debit'') and (iii) other information in 
respect of the Canadian-Link Transactions of such Canadian-Link 
Participant processed through the Canadian-Link Service on such CDS 
Business Day, including both Cross-Border Transactions with CDS 
Participants processed for such Participant through the DTC Omnibus 
Account and Intra-DTC Transactions with other Canadian-Link 
Participants processed for such Participant through Accounts with 
the Corporation.'' Id.
    \56\ Pursuant to Rule 30, Section 12(b), the term ``DTC 
Settlement Recap Time'' means the time when DTC provides the DTC 
Settlement Recap to Canadian-Link Participants. Id.
    \57\ Pursuant to Rule 30, Section 1(h)(5), the term ``Funds'' is 
defined as CAD Funds and USD Funds, individually or collectively as 
the context may require. Id.
    \58\ Pursuant to Rule 30, Section 1(a)(5), the term ``Intra-DTC 
CAD Funds Transactions'' is defined as the transfer of Canadian 
dollars between Participants of DTC and other Participants of DTC. 
Id.
    \59\ Pursuant to Rule 30, Section 1(a)(3), the term ``Intra-DTC 
CAD Securities Transactions'' is defined as the settlement of valued 
transactions (A) in Securities that are Eligible Securities (B) in 
Canadian dollars (C) between Participants of DTC and other 
Participants of DTC. Id.
    \60\ Pursuant to Rule 30, Section 13(d), the term ``Participant 
Canadian Settlement Bank'' is defined as a Canadian Bank acting on 
behalf of a Canadian bank to which all payments of CAD Funds to or 
by a Canadian-Link Participant shall be made. Id.
    \61\ Pursuant to Rule 30, Section 16 (c), ``Payment Default 
Conversion Rate'' is defined as follows: ``If any computation has to 
be made requiring the conversion of an amount of CAD Funds into an 
amount of USD Funds for the purpose of calculating the Gross 
Settlement Debit of a Canadian-Link Participant pursuant to Section 
15 of this Rule 30, the conversion rate for such purpose shall be a 
rate determined by a formula (taking into account all factors 
incident to the default of such Participant in the payment of its 
Canadian-Link CAD Net Settlement Debit) that shall be fixed by the 
Corporation and set forth in the Procedures (the ``Payment Default 
Conversion Rate'').'' Id.
    \62\ Pursuant to Rule 30, Section 16(a), the term ``Payment 
Default Exchange Rate'' is defined as the exchange rate determined 
by a formula (taking into account all factors incident to the 
default of such Participant in the payment of its Canadian-Link CAD 
Net Settlement Debit) that shall be fixed by DTC and set forth in 
the Procedures. The exchange rate relates to any amount of USD Funds 
has to be exchanged for an amount of CAD Funds to pay (or re-fund) a 
DTC Omnibus Account CAD Net Settlement Debit to CDS in accordance 
with Section 13 of this Rule 30 because a Canadian-Link Participant 
failed to pay DTC the amount of its Canadian-Link CAD Net Settlement 
Debit. Id.
    \63\ Pursuant to Rule 30, Section 1(h)(4), the term ``USD 
Funds'' is defined as funds denominated in US dollars. Id.
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    Cross references to sections of Rule 30 for certain defined terms 
would be revised to reflect renumbering of the respective referenced 
sections, as more fully described below. The referenced section for the 
term (A) ``Canadian-Link Participants'' would be revised from Section 
1(h)(1) to Section 1(e)(1), (B) ``Canadian-Link Securities'' from 
Section 1(h)(14) to Section 1(e)(8), (C) ``Canadian-Link Transactions'' 
from Section 1(h)(11) to Section 1(e)(5), ``CDS Business Day'' from 
Section 11(a) to Section 7(a), (D) ``CDS Participants'' from Section 
1(h)(2) to Section 1(e)(2), (E) ``Cross-Border Securities'' from 
Section 1(h)(12) to Section 1(e)(6), (F) ``Cross-Border Transactions'' 
from Section 1(h)(9) to Section 1(e)(3), (G) ``DTC Business Day'' from 
Section 11(a) to Section 7(a), (I) ``Intra-DTC Securities'' from 
Section 1(h)(13) to Section 1(e)(7), and ``Intra-DTC Transactions'' 
from Section 1(h)(10) to Section 1(e)(4).
Section 1--Overview of Canadian Link Service
    Section 1 of Rule 30 describes the scope of services offered by DTC 
relating to the Canadian-Link Service. Pursuant to the proposed rule 
change, Section 1 of Rule 30 would be revised to remove references to 
the processing of CAD Securities and CAD Funds transactions through the 
Canadian-Link service and provide only for processing of Free 
Deliveries through the link. These changes include:
    (i) Consolidate subsection (a) of Section 1 by eliminating 
references to DTC processing of (1) Cross-Border CAD Securities 
Transactions, (2) Cross-Border USD Securities Transactions, (3) Intra-
DTC CAD Securities Transactions, (4) Cross-Border CAD Funds 
Transactions and (5) Intra-DTC CAD Funds Transactions, and instead 
refer to processing of Free Deliveries only.
    (ii) Subsection (b) of Section 1 which currently states, among 
other things, that DTC provides the Canadian-Link Service as a 
Securities Intermediary for its Participants, and all transactions in 
Securities and transfers of funds are subject to the Rules and 
Procedures of the Corporation, including this Rule 30 and the 
Procedures adopted pursuant to Rule 30, would be amended to delete the 
reference to ``and transfers of funds.'' This reference would be 
deleted as DTC would no longer offer the ability to process CAD Funds 
Transactions through the Canadian-Link Service. As indicated above, DTC 
notes that distributions such as principal, interest and dividend 
payments relating Securities held at CDS by DTC on behalf of 
Participants would continue to be processed through DTC's CAD Settling 
Bank to DTC Participants, pursuant to the applicable provisions of the 
OA. Processing of such distributions are conducted through DTC's asset 
servicing functions and are not part of the DVP functionality that DTC 
proposes to eliminate from its Rules and Procedures.
    (iii) DTC would amend Subsection (c) of Section 1 to change 
references to ``seller'' and ``purchaser'' of Securities to 
``Deliverer'' \64\ and ``Receiver,'' \65\ respectively, to harmonize 
the use of terms with DTC's rules related to settlement of Securities 
Deliveries and receives generally. DTC would also amend the text of 
this subsection to reflect the proposal that DVP transactions would no 
longer be processed through the Canadian-Link Service. In this regard, 
references to settlement in CAD would be deleted, and the text would 
refer to the crediting and debiting of Securities from a ``Deliverer'' 
to a ``Receiver.'' Also, Subsection (d) directly below Subsection (c), 
which refers to cross-border settlement of transactions in USD would be 
deleted in its entirety to reflect the elimination of DVP settlement 
through the service. Since Subsection (c), as described above, would be 
written to address the Deliveries and Receives of Securities, 
generally, Securities transactions previously covered under Subsection 
(d) would be covered under the proposed revisions to Subsection (c).
---------------------------------------------------------------------------

    \64\ Pursuant to Rule 1, the term ``Deliverer,'' as used with 
respect to a Delivery of a Security, means the Person which Delivers 
the Security. See Rule 1, supra note 5.
    \65\ Pursuant to Rule 1, the term ``Receiver,'' as used with 
respect to a Delivery of a Security, means the Person which receives 
the Security. Id.
---------------------------------------------------------------------------

    (iv) Subsection (e) of Section 1 describes the processing of CAD 
Securities Transactions between DTC Participants. DTC proposes to amend 
Subsection (e) of Section 1 to reflect the elimination of money 
settlement relating to transactions conducted through the Canadian-Link 
Service. In this regard, a sentence that describes the debiting and 
crediting of Securities between Participants and references the term 
``Intra-DTC CAD Securities Transaction'' would be revised to refer to 
``intra-DTC Securities transaction'' instead, to reflect that movements 
of Securities between Participants would continue to be permitted 
through the Canadian-Link Service, even though the ability to settle a 
Securities transaction in CAD would be eliminated. In addition, DTC 
would change references to ``seller'' and ``purchaser'' of Securities 
to ``Deliverer'' and ``Receiver,'' respectively, to harmonize the use 
of terms with DTC's rules related to settlement of Securities 
deliveries and receives generally. DTC would also revise Subsection (e) 
so that it would be renumbered as Subsection (d) to reflect the 
deletion of the current Subsection (d), described above.
    (v) DTC would delete Subsection (f) of Section 1 which states: ``A 
Cross-Border CAD Funds Transaction between a Participant of the 
Corporation and a participant of CDS is processed through the 
facilities of CDS.'' In addition, DTC would delete Subsection (g) of 
Section 1 which states: ``An Intra-DTC CAD Funds Transaction between a 
Participant of the Corporation and another Participant of Corporation 
is processed though Canadian settlement banks acting for the 
Corporation and such Participants.'' Both subsections would be obsolete 
because of the elimination of CAD processing through the Canadian-Link 
Service.
    (vi) Subsection (h) of Section 1 would be amended to delete 
explanations of certain definitions described above, including CAD 
Funds, USD Funds, Funds, Cross-Border Securities Transactions, 
Canadian-Link Securities Transactions, Canadian-Link Funds 
Transactions, and Canadian-Link CAD Money Settlement. Also the 
definitions of Intra-DTC Transactions, Cross-Border Securities, Cross-
Border Transactions and Intra-DTC Securities would be amended to 
reflect the above-described elimination of money settlement in the 
Canadian-Link Service so that transactions are not referred to as 
involving DVP settlement or payment of funds. In this regard, 
references to the terms ``Cross-Border USD Securities Transactions'' 
and ``Cross-Border CAD Securities Transactions'' as elements of the 
definition of ``Cross-Border Transactions'' would be replaced with an 
undefined term ``Cross-border securities transactions'' to reflect that 
movements of Securities between Canadian-Link Participants and CDS

[[Page 38386]]

Participants would continue to be permitted through the Canadian-Link 
Service, even though the ability to settle a Securities transaction 
versus payment would be eliminated. Further, ``Intra-DTC CAD Securities 
Transactions'' and ``Intra-DTC CAD Funds Transactions'' as elements of 
the definition of ``Intra-DTC Transactions'' would be replaced with a 
reference ``Intra-DTC securities transactions,'' for the same reason as 
an identical change to current Subsection (e) of Section 1 (proposed to 
be renumbered as Subsection (d)), as described above. Also, ``Cross-
Border CAD Securities Transactions'' and ``Cross-Border USD Securities 
Transactions'' used as elements of the description of ``Cross-Border 
Securities'' would be deleted and replaced with Cross-Border 
Transactions. Also, ``Intra-DTC CAD Securities Transactions,'' used as 
a descriptor relating to Securities underlying an element of the 
definition of ``Intra-DTC Securities,'' would be replaced with ``Intra-
DTC Transactions,'' because (i) even though Intra-DTC CAD Securities 
Transactions would no longer be provided for under Rule 30, intra-DTC 
Securities transactions could still occur through the Canadian-Link 
Service, as described above and (ii) such transactions would defined as 
``Intra-DTC Transactions,'' as described above. In addition, Subsection 
(h) would be renumbered as Subsection (e) to conform the numbering of 
this section with the elimination and renumbering of other subsections 
as described above. In this regard, the explanations of definitions in 
subsection (h) are currently set forth in an itemized list numbered 
from (1) to (15), with each item followed by a semicolon. As a result 
of the proposed revisions described above, in addition to changes to 
the text to reflect the substantive changes described above, item 
numbers (3), (4), (5), (6) (7), (8) and (15) would be deleted and items 
(9), (10), (11), (12), (13) and (14) would be renumbered respectively 
as (3), (4), (5), (6), (7) and (8). A semicolon and the word ``and'' 
would be deleted from the end of current (14) (to be renumbered as (8)) 
and replaced with a period because the deletion of (15) would make the 
newly renumbered (8) the last item of this list. The word ``and'' would 
be added to the end of current (13) (to be renumbered as 7) directly 
after an existing semicolon.
Section 2--CDS Documents
    Section 2 of Rule 30 provides, among other things, that ``[E]ach 
Canadian-Link Participant shall observe and comply with the CDS 
Documents applicable to the Canadian-Link Service as if such Canadian-
Link Participant were a CDS Participant and a direct party to the CDS 
Documents. Each Canadian-Link Participant acknowledges that the CDS 
Documents may include grants of security interests in and liens on 
Cross-Border Securities and CAD Funds in which such Canadian-Link 
Participant may have an interest. . . .''
    Pursuant to the proposed rule change, DTC proposes to change ``CAD 
Funds'' in the preceding sentence to ``funds.'' As described herein, 
the term ``CAD Funds'' would be eliminated pursuant to the proposed 
rule change. However, CDS may continue to have a security interest in 
funds owed to DTC for dividends and interest paid on Securities held by 
DTC at CDS on behalf of Canadian-Link Participants.\66\
---------------------------------------------------------------------------

    \66\ See Section 5.2.2 of CDS's rules, available at https://www.cds.ca/resource/en/311.
---------------------------------------------------------------------------

Section 4--Participants Eligible for Canadian-Link Service
    Section 4 of Rule 30 provides, among other things that ``A Security 
that is an Eligible Security may or may not be a Canadian-Link Security 
and may or may not be the subject of Cross-Border CAD Securities 
Transactions, Cross-Border USD Securities Transactions and/or Intra-DTC 
Securities Transactions. A Security that is not an Eligible Security 
may be a Limited-Service Canadian-Link Security, but it may not be a 
Full-Service Canadian-Link Security and may not be the subject of 
Intra-DTC CAD Securities Transactions.'' Consistent with the proposed 
changes described above, DTC proposes to amend this section to 
eliminate references to CAD and USD-related transactions and refer to 
transactions without reference to Canadian or U.S. currency. In this 
regard, a reference to ``Intra-DTC CAD Securities Transactions'' would 
be revised to ``Intra-DTC Transactions'' in a sentence describing to 
the effect, among other things, that a Limited-Service Canadian-Link 
Security cannot be included in an intra-DTC Securities transaction.
Section 5--Canadian-Link Interface and DTC Omnibus Account
    Section 5(a) of Rule 10 includes a description of ledgers and 
accounts that CDS maintains for DTC at CDS that relate to Securities 
and funds. The funds accounts are denominated in Canadian dollars and 
US dollars. While the DVP function of the Canadian-Link Service would 
be discontinued pursuant to the proposed rule change, DTC would 
continue to receive dividends and interest on Securities held by it at 
CDS and DTC may owe fees for services to CDS. As a result, DTC would 
continue to maintain funds accounts for these purposes. While the terms 
``CAD Funds'' and ``USD Funds'' would be removed from Rule 30 as 
described herein, DTC proposes to replace these terms as used in 
Section 5(a) of Rule 30 with ``Canadian Dollar funds'' and ``US dollar 
funds,'' respectively.
    Section 5(b) provides that DTC will make the DTC Omnibus Account 
available for the purpose of processing Cross-Border Transactions 
between Canadian-Link Participants and CDS Participants. This section 
states that DTC will act on behalf of Canadian-Link Participants and in 
accordance with their instructions, but DTC maintains, at all times, 
control over the Cross-Border Securities and Funds in the DTC Omnibus 
Account. As described herein, DTC would remove the defined term for 
``Funds''. However, as described above, DTC would continue to receive 
funds into its account at CDS in the form of dividends and interest. 
Therefore, DTC would replace ``Funds'' as used in Section 5(b) with 
``funds.''
Section 6--Canadian-Link Required Participants Fund Deposit
    Section 6 of Rule 30 provides that a Participant must make a 
deposit that is deemed to be included in the Participants Fund with 
respect to DVP volume conducted by the Participant through the 
Canadian-Link Service. The section also provides for the investment of 
such deposits by DTC and the payment of interest for those investments 
to the applicable Participants. The Participants Fund provides 
liquidity for DTC to complete settlement in the event a Participant 
fails to meet its settlement obligation. Section 6 would be deleted in 
its entirety pursuant to the proposed rule change, because Participants 
would no longer have a settlement obligation in the Canadian-Link 
Service due to the elimination of money settlement for Securities 
transactions conducted through the service. In this regard, DTC would 
no longer have a settlement obligation with respect to CDS. As a 
result, there would no longer be a need to maintain such deposits with 
respect to Canadian-Link activity.
Section 7--Security for Canadian-Link Transactions
    Section 7 of Rule 30 provides DTC with a security interest in 
Securities settled DVP through the Canadian-Link Service and allows DTC 
to use such Securities to secure loans for purposes of completing 
settlement in the event a Participant fails to satisfy its settlement 
obligation. This Section would be

[[Page 38387]]

deleted in its entirety pursuant to the proposal, because since 
Participants would no longer be able to incur a settlement obligation 
with respect to activity within the Canadian-Link Service, it would no 
longer necessary for DTC to maintain a security interest in Securities 
that are the subject of Canadian-Link Transactions.
Section 8--Canadian-Link Net Debit Caps of Canadian-Link Participants
    Section 8 of Rule 30 provides for a limit to be established by DTC 
(i) on the negative CAD Funds balance that may, from time to time, be 
incurred by a Canadian-Link Participant in respect of Canadian-Link 
Transactions processed for such Participant through the Canadian-Link 
Service in CAD Funds (each a ``Canadian-Link CAD Net Debit Cap'') and 
(ii) on the negative USD Funds balance that may, from time to time, be 
incurred by a Canadian-Link Participant in respect to Canadian-Link 
Transactions processed for such Participant through the Canadian-Link 
Service in USD Funds (each, a ``Canadian-Link USD Net Debit Cap''). The 
Canadian-Link CAD Net Debit Cap and Canadian-Link USD Net Debit Cap are 
referred to, individually or collectively as the context may require, 
as the ``Canadian-Link Net Debit Cap.'' This Section subjects all 
transactions processed though the Canadian-Link Service to be subject 
to the Canadian-Link Net Debit Cap. The section further provides that 
DTC shall not comply with any instruction from a Canadian-Link 
Participant in respect of any Canadian-Link Transaction that would 
cause DTC to exceed its DTC Omnibus Account Net Debit Cap or cause such 
Canadian-Link Participant to exceed its Canadian-Link Net Debit Cap but 
rather shall pend such Canadian-Link Transaction (subject to the Rules) 
until such Canadian-Link Transaction may be processed without causing 
DTC to exceed its DTC Omnibus Account Net Debit Cap or causing such 
Canadian-Link Participant to exceed its Canadian-Link Net Debit Cap.
    Pursuant to the proposed rule change, DTC would delete Section 8 of 
Rule 30 in its entirety. The maintenance of a Canadian-Link Net Debit 
Cap would no longer be necessary as this limit applies to DVP 
transactions, and DVP transactions would no longer be processed through 
the Canadian-Link Service.
Section 9--Collateral Monitor of Canadian-Link Participants
    In addition to the Net Debit Cap,\67\ another tool DTC uses in 
managing credit risk is the Collateral Monitor.\68\ These two controls 
work together to protect the DTC settlement system in the event of 
Participant default. The Collateral Monitor requires net debit 
settlement obligations, as they accrue intraday, to be fully 
collateralized. Meanwhile, the Net Debit Cap limits the amount of any 
Participant's net debit settlement obligation to the amount that can be 
satisfied with DTC liquidity resources. Section 9 of Rule 30 provides 
for activity conducted by a Participant through the Canadian-Link 
Service to be included in the Participant's Collateral Monitor. For the 
same reason as described above with respect to the elimination of 
Section 8, DTC would delete Section 9 in its entirety, because the 
elimination of DVP activity would eliminate any credit risk associated 
with transactions conducted through the Canadian-Link Service, and 
therefore DTC would no longer require the inclusion of Canadian-Link 
activity in the Collateral Monitor in managing its credit risk.
---------------------------------------------------------------------------

    \67\ Id.
    \68\ Id.
---------------------------------------------------------------------------

Section 10--Processing Canadian-Link Transactions
    Section 10 of Rule 30 provides for the process by which Securities 
and funds are credited and debited to and from Canadian-Link 
Participants' accounts for activity instructed by Participants to be 
processed through the Canadian-Link Service. As described above, DTC 
would continue to process transfers of Securities through the Canadian-
Link Service, but it would no longer process DVP and/or CAD Funds 
activity for transactions conducted through the service. Therefore, 
pursuant to the proposed rule change, DTC would amend Section 10 to 
reflect the elimination of processing of funds debits and credits as 
part of the processing of Canadian-Link Transactions. In this regard, 
DTC would also revise references in the text of this section to (a) 
``Canadian-Link Securities Transaction'' to ``Canadian-Link 
Transaction,'' (b) ``Intra-DTC CAD Securities Transaction'' to ``Intra-
DTC Transaction,'' and (c) ``Cross-Border Securities Transaction'' to 
``Cross-Border Transaction,'' because the currently used terms would be 
deleted from Rule 30, as described above, and the elimination of the 
processing of funds debits and credits, as described above, would 
eliminate the need for the use of defined terms relating to 
transactions processed through the Canadian-Link that distinguish 
between Securities transactions from funds transactions. Further 
subsections (C) and (D) of Section 10(a)(1) and Item (iii) of Sections 
10(a)(2)(A) and 10(a)(2)(B) would be deleted from Rule 30. Finally, 
this section would also be renumbered as Section 6 due to the deletion 
of the original Sections 6, 7, 8 and 9, as described above.
Section 11--CDS Business Days
    Pursuant to the proposed rule change, Section 11 would be 
renumbered as Section 7.
Section 12--Settlement Recaps
    Section 12 provides the process for the issuance of Settlement 
Recaps by DTC. Because the money settlement aspect of the Canadian-Link 
Service would be eliminated, there would no longer be a need for DTC to 
issue Settlement Recaps with respect to CAD activity. Therefore, DTC 
would eliminate Section 12 in its entirety because Settlement Recaps 
would no longer be issued by DTC, and this Section would become 
obsolete.
Section 13--Settlement Payments
    Section 13 provides for the processing of settlement payments 
relating to DVP activity through the Canadian-Link Service. As 
described above, money settlement would be eliminated pursuant to the 
proposed rule change. Therefore, DTC would no longer provide for money 
settlement relating to transactions processed through the Canadian-
Link. In this regard, DTC proposes to eliminate Section 13 in its 
entirety as it would become obsolete.
Section 14--End of Day Sweep
    Section 14 provides for the timing of the movement of Securities 
between accounts used for the Canadian-Link Service. This section 
provides that such movements occur at the end of each CDS Business Day 
after the completion of money settlement. DTC would delete the 
provision requiring for the completion of money settlement prior to the 
``sweeping'' of Securities in this regard as DTC would no longer be 
conducting money settlement for the Canadian-Link Service. Also, DTC 
would renumber this section as Section 8 to reflect the renumbering and 
deletion of previous sections as described above.

[[Page 38388]]

Section 15--Failure To Make Settlement Payments
    Section 15 provides the process to be followed if a Participant 
fails to make payment with regards to Canadian-Link activity. As 
described above, DTC proposes to eliminate money settlement with 
respect to Canadian-Link activity. In this regard, DTC would delete 
Section 15 in its entirety as it would become obsolete due to the 
elimination of settlement payments through this service.
Section 16--Currency Conversion and Exchange
    Section 16 provides the process for the conversion of USD Funds to 
CAD Funds as necessary for a Participant to complete settlement or 
satisfy its risk controls relating to the Canadian-Link Service. Since 
money settlement would no longer occur through this service, such 
conversions of currency would no longer occur, and this section would 
become obsolete. Therefore, pursuant to the proposed rule change, DTC 
would delete Section 16 in its entirety.
Section 17--Choice of Law and Submission to Jurisdiction
    To conform the numbering of sections to reflect the deletion and 
renumbering of previous sections as described above, Section 17 would 
be renumbered as Section 9.
Section 18--Canadian Link Charges
    Section 18 provides that Participants must pay to DTC any fees and 
charges relating to their use of the Canadian-Link Service. These 
charges include charges relating to the cost to DTC for maintaining 
liquidity resources to settle Canadian-Link Transactions. As mentioned 
above, money settlement under this service would be eliminated and 
therefore it would no longer necessary for DTC to maintain such 
liquidity resources with respect to activity processed through the 
Canadian-Link Service. Therefore, text referring to charges relating to 
the cost of maintaining liquidity resources with respect to the 
Canadian-Link Service would be obsolete and would be deleted. As a 
result of these proposed changes, to conform the numbering of the 
subsections to reflect the deletion of subsection (ii), the subsections 
following would be renumbered, (ii), (iii), (iv) and (v). Also, to 
conform the numbering of sections to reflect the deletion and 
renumbering of previous sections as described above, Section 18 would 
be renumbered as Section 10.
Elimination of the Canadian-Link Service Guide
    DTC proposes to eliminate the full text of the Guide. The Guide 
relates to Procedures necessary for the DVP settlement of Canadian-Link 
Transactions. These Procedures cover all operational aspects of the 
service as it relates to DVP activity, including DVP transaction 
processing, risk controls and tracking established to control for 
failed DVP transactions in the processing of end-of-day sweeps. Due to 
the elimination of money settlement through the Canadian-Link Service, 
this Guide would become obsolete.
Proposed Changes to the OA
    The OA sets forth requirements that a Security must meet to become 
and remain eligible for DTC services and provides for the orderly 
processing of such Securities and timely payments to Participants.
Proposed Changes to Text of the OA Relating to Eligibility 
Requirements/Non-U.S. Denominated Securities
    Section I.C.5. of the OA contains provisions relating to the 
eligibility of Securities denominated in a non-U.S. currencies and 
processing of distribution payments in non-U.S. currencies. This 
section currently contains references to CAD settlement through the 
Canadian-Link Service. To reflect the proposed elimination of money 
settlement in the Canadian-Link Service, DTC proposes to amend this 
section to remove references to the availability of Canadian dollar 
settlement. Since, as described above, DTC would continue to process 
distributions in CAD, this section would continue to provide for such 
distributions in CAD. The proposed rule change would make a grammatical 
change that does not affect the substance of the section.
Proposed Changes to Dividend and Income Payment Notification Procedures
    Section IV of the OA sets forth Dividend and Income Payment 
Notification Procedures. Subsection B of this section describes 
currency provisions relating to dividend and income payments, and 
specifically refers to such payments made in CAD. The text includes 
mentions of CAD settlement performed through the Canadian-Link Service. 
It also refers to the service generally as ``Canadian dollar 
settlement.'' In order to reflect the proposed elimination of CAD 
settlement through the Canadian-Link Service, DTC would (i) revise this 
section to delete provisions referring to or describing CAD settlement 
and (ii) modify a statement relating to Securities eligible to receive 
payments in CAD from referencing Securities eligible for Canadian 
dollar settlement to Securities eligible for the Canadian-Link Service.
    Also, the proposed rule change in this regard would cause a defined 
term for CDS to be deleted as it falls within a paragraph that 
describes CAD settlement. The proposed rule change moves the defining 
term for CDS to a sentence that would not be eliminated by the 
proposal.
Effective Date
    The proposed rule change would become effective upon filing with 
the Commission.
2. Statutory Basis
    Section 17A(b)(3)(F) of the Act requires, in part, that the Rules 
be designed to promote the prompt and accurate clearance and settlement 
of Securities transactions.\69\ DTC believes that the proposed rule 
change is consistent with this provision because it would provide 
enhanced clarity and transparency for participants with respect to 
services offered by DTC by updating the Rules to remove the ability to 
access services that Canadian-Link Participants have not recently 
utilized and are unlikely to utilize in the future.
---------------------------------------------------------------------------

    \69\ 15 U.S.C. 78q-1(b)(3)(F).
---------------------------------------------------------------------------

    Therefore, by providing enhanced clarity and transparency in the 
Rules regarding the services provided by DTC, DTC believes the proposed 
rule change would promote the prompt and accurate clearance and 
settlement of Securities transactions, consistent with the requirements 
of the Act, in particular Section 17A(b)(3)(F), cited above.

(B) Clearing Agency's Statement on Burden on Competition

    DTC does not believe that the proposed rule change would have any 
impact on competition. Participants have not used the Canadian-Link 
Service for DVP Securities and/or CAD Funds transactions in several 
years. Also, based on discussions DTC has had with Participants 
regarding their use of the Canadian-Link Service, DTC believes 
Participants are unlikely to use the service for this purpose in the 
future. Therefore, DTC believes that the proposed rule change should 
have no effect on Participants, other than to remove references to the 
ability for Participants to conduct DVP transactions through the 
Canadian-Link Service from the Rules and Procedures, which transactions 
are unlikely to be conducted by Participants.

[[Page 38389]]

(C) Clearing Agency's Statement on Comments on the Proposed Rule Change 
Received From Members, Participants, or Others

    DTC has not received or solicited any written comments relating to 
this proposal. DTC will notify the Commission of any written comments 
received by DTC.

III. Date of Effectiveness of the Proposed Rule Change, and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) \70\ of the Act and paragraph (f) \71\ of Rule 19b-4 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \70\ 15 U.S.C. 78s(b)(3)(A).
    \71\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#aedcdbc2cb83cdc1c3c3cbc0daddeeddcbcd80c9c1d8"><span class="__cf_email__" data-cfemail="2b595e474e06484446464e455f586b584e48054c445d">[email protected]</span></a>. Please include 
File Number SR-DTC-2021-012 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549.

All submissions should refer to File Number SR-DTC-2021-012. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of DTC and on DTCC's website 
(http://dtcc.com/legal/sec-rule-filings.aspx). All comments received 
will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-DTC-2021-012 and should be submitted on 
or before August 10, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\72\
---------------------------------------------------------------------------

    \72\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15345 Filed 7-19-21; 8:45 am]
BILLING CODE 8011-01-P


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